just in in-tray, per stratfor, thinking that team usa has the nuts to endanger china oil supply (from iran) and turn back china ships bound for iran, and actually believes 421 is a potent tool against china as opposed to a blow to usa consumers and debtors. precious. stratfor often enough forgets the creature that is the all-for-one-and-one-for-all shanghai cooperation organization (presented as an anti-terrorists alliance :0) which features the rebellion group comprising russia, china, plus a bunch of hangers-on, with iran, mongolia, india, pakistan observing, collectively, 1/2 the world, plus or minus.
China: The Stakes of Gasoline Sales to Iran
Stratfor Today » September 23, 2009 | 2326 GMT
ATTA KENARE/AFP/Getty Images
Iranian Foreign Minister Manouchehr Mottaki (3rd-R) greets (from L) Britain’s Deputy Ambassador to Iran Patrick Davies, Chinese Ambassador Xie Xiaoyan, Russian envoy Alexander Sadovikov, French Ambassador to Iran Bernard Poletti, Swiss diplomat Livia Leu Agosti and German Ambassador to Iran Herbert Honsowitz at the Foreign Ministry in Tehran on Sept. 9Summary
As the United States ramps up for potential gasoline sanctions on Iran, a Sept. 23 news report said China increased its gasoline exports to Iran, upwards of one third of those imports for Iran. China’s timing suggests it is setting itself up for a strong bargaining position with the United States if and when sanctions on Iran are officially endorsed. In the meantime, however, it makes economic sense for the Chinese to take the opportunity to trade with Iran now.
Analysis
Energy traders told the media on Sept. 23 that China has supplied about a third of Iran’s September gasoline imports. This comes prior to the P-5+1 talks on Oct. 1. The United States will then likely push for sanctions on gasoline imports to Iran if the Iranians remain defiant on their nuclear posture. The United States has already laid the groundwork for a sanctions regime by pressuring global oil, shipping and insurance companies that have considerable assets in the U.S. market. In light of the U.S. push for sanctions, the news that China has been selling to Iran in September 30,000-40,000 barrels per day from the Asian spot market via intermediaries warrants attention.
Beijing sees an economic opportunity to supply gasoline to Iran for the time being. Traditional gasoline suppliers to Iran, including BP, Reliance and Total (though even France is starting to waver on these sanctions) have caved to U.S. pressure and have cut back on gasoline supplies to Iran in the interest of maintaining their assets in the U.S. market. With a number of energy majors dropping out of the gasoline trade to Iran, an enticing market has opened up for secondary players, like Malaysia’s Petronas and Chinese energy companies, to fill the gap. Before September, China and Iran were primarily involved together in the gasoline trade through shipping companies, namely the China Shipping Development Company. These companies have shipped gasoline supplies to Iran on behalf of other foreign suppliers, such as Petronas. Although some firms have stopped selling gasoline to Iran, it is still getting more than enough gasoline. This opportunity is even more appealing given China’s gasoline surplus due to the recession and the fact that it has added more refining capacity this year. It has been pushing gasoline onto the international market recently, and in August, it exported 140,000 barrels of gasoline per day –- the highest level in 2009. Now, the exit of previous suppliers to Iran has left an attractive opening.
But China does not want to face off with the United States, because it continues to rely on its markets and consumers. Moreover, China is a massive energy importer itself, so exporting gasoline to Iran is something that works against its own energy security strategies. Also, China cannot protect the supply routes that take its gasoline to Iran; that is unlike Russia, which has already indicated that it would blow a hole in U.S. sanctions, has more political leverage to use against the United States with less U.S. recourse, and it can send gasoline more securely to Iran via overland routes. Because of China’s potentially weak bargaining position, it needs to gather its bargaining chips now, should the United States impose sanctions after the Oct. 1 talks.
If China resists sanctions, the United States has one potent tool it can use to induce China to comply — something it cannot use on Russia. The Obama administration leveraged a 35 percent tire tariff on China on Sept. 11, invoking the use of Section 421 of the agreement China signed to enter the World Trade Organization (WTO). Section 421 allows China’s WTO trading partners to levy tariffs on any Chinese import that has increased, and they do not have to show proof of unfair trade practices. China has little recourse against Section 421 economically, but via gasoline supplies, it can somewhat complicate American policy in Iran.
China traditionally has resisted international sanctions against Iran, but if it is going to be forced to collaborate with the United States, it will now have a bargaining chip by way of Iranian gasoline supplies.
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